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Economics Research International
Volume 2014 (2014), Article ID 253527, 9 pages
Research Article

Contribution of Co-Skewness and Co-Kurtosis of the Higher Moment CAPM for Finding the Technical Efficiency

Mathematics Section, School of Distance Education, Universiti Sains Malaysia, Penang, Malaysia

Received 13 June 2013; Revised 22 November 2013; Accepted 9 December 2013; Published 16 January 2014

Academic Editor: Jean Paul Chavas

Copyright © 2014 Md. Zobaer Hasan and Anton Abdulbasah Kamil. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


The objective of this paper is to present the technical efficiency of individual companies and their respective groups of Bangladesh stock market (i.e., Dhaka Stock Exchange, DSE) by using two risk factors (co-skewness and co-kurtosis) as the additional input variables in the Stochastic Frontier Analysis (SFA). The co-skewness and co-kurtosis are derived from the Higher Moment Capital Asset Pricing Model (H-CAPM). To investigate the contribution of these two factors, two types of technical efficiency are derived: (1) technical efficiency with considering co-skewness and co-kurtosis (WSK) and (2) technical efficiency without considering co-skewness and co-kurtosis (WOSK). By comparing these two types of technical efficiency, it is noticed that the technical efficiency of WSK is higher than the technical efficiency of WOSK for the individual companies and their respective groups. As per available literature in the context Bangladesh stock market, no study has been conducted thus far to measure technical efficiency of companies and their respective groups by using the risk factors which are derived from the H-CAPM. In this research, the link between H-CAPM and SFA is established for measuring technical efficiency and it is believed that the findings of this study may be applied to other emerging stock markets.